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The largest global industrial wood pellet supplier filed for Chapter 11 bankruptcy protection on Wednesday, announcing its intention to cut about $1 billion of debt by restructuring agreements with creditors, including those who have invested heavily in new facilities.<\/p>\n
Maryland-based Enviva said in\u00a0the filing<\/a>\u00a0that its debts exceed $2.6 billion. The company owes $780 million to a Delaware bank, $348 million to a German energy company, as well as $353 million in bonds from local development authorities in Mississippi and Alabama. The announcement came two months after Fitch Ratings downgraded Enviva\u2019s default rating following a missed interest payment of $24.4 million.<\/p>\n \u201cConsiderable uncertainty exists regarding Enviva\u2019s ability to renegotiate uneconomic customer contracts\u201d entered into in the fourth quarter of the 2022 fiscal year, the global credit-rating agency said in a Jan. 19 press release.<\/p>\n Over the past 20 years, Enviva worked to meet increasing global demand for alternative energy sources and built 10 wood pellet production plants across the U.S. South, capitalizing on the heavily forested region\u2019s reputation as the world\u2019s \u201cwood basket.\u201d<\/p>\n With increased\u00a0interest from Asian<\/a>\u00a0and\u00a0European nations<\/a>\u00a0\u2018 in burning wood for fuel, Enviva officials had hoped that new plants in Alabama and Mississippi would increase its existing annual pellet production of about 5 metric tons (5.5 tons). Construction will continue at its location in Epes, Alabama, Enviva said in a March 12 statement. But the development of a Bond, Mississippi, facility is pausing until the company finishes restructuring.<\/p>\n \u201cWe look forward to emerging from this process as a stronger company with a solid financial foundation and better positioned to be a leader in the future growth of the wood-based biomass industry,\u201d Glenn Nunziata, Enviva\u2019s interim chief executive officer, said in a statement.<\/p>\n New payback plans will be hammered out with one investment group that holds over three-fourths of the bonds related to the Alabama plant and another group with more than 92% of the bonds for the Mississippi plant.<\/p>\n Danna Smith, the executive director of the Dogwood Alliance, celebrated the bankruptcy filing as a sign that what she called Enviva\u2019s \u201cgreenwashing tactics and lack of transparency\u201d have caught up to the company.<\/p>\n Smith is among many environmental activists who have long contested Enviva\u2019s claims that its production process \u2014 and burning wood for energy \u2014 is carbon neutral and helps revitalize rural areas. Opponents argue that the harvesting of forests and burning of wood pellets has a negative overall impact on carbon reserves, while polluting\u00a0the poor, Black communities<\/a>\u00a0often located near the manufacturing plants.<\/p>\n The Dogwood Alliance urged the Biden Administration this fall to prevent wood pellet producers from accessing a tax credit that received additional funding under the Inflation Reduction Act, which marked\u00a0the most substantial federal investment<\/a>\u00a0to date in the fight against climate change.<\/p>\n \u201cOur government must not give one more dime to this failing, dirty industry,\u201d Smith said in a Wednesday statement. \u201cInstead, we need to focus on recovery and transition.\u201d<\/p>\n ___<\/p>\n Pollard is a corps member for the Associated Press\/Report for America Statehouse News Initiative.\u00a0Report for America<\/a>\u00a0is a nonprofit national service program that places journalists in local newsrooms to report on undercovered issues.<\/p>\n<\/div>\nSubscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up<\/a> for free.<\/div>\n